UPDATE 1-Australia's ME Bank prices A$500 mln 3-yr bonds

(Adds deal details, distribution details, comments)
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SYDNEY, Aug 13 (Reuters) - Australian lender ME Bank has
priced A$500 million ($417 million) of three-year bonds backed
by an Australian government guarantee at 50 basis points over
swap, it said on Thursday.

The issue consisted of A$250 million in fixed rate and
A$250 million in floating rate notes.

Macquarie Bank, National Australia Bank and Westpac
Institutional Bank jointly lead the offer.

Investors rushed to participate in the offer with 20
investors pushing the final book above A$1 billion.

ME Bank capped the issue size at A$500 million and accounts
were scaled back.

It is the first senior bond for ME Bank, formerly known as
Members Equity Bank.

The bank used to heavily rely on the securitisation markets
to raise funds to finance its home loan business but, since the
U.S. subprime mortgage crisis hit, residential mortgage backed
securities (RMBS) have fallen out of favour worldwide.

ME Bank plans to sell more senior bonds in the future.

"Completion of the MTN issue continues to diversify the
funding base available to the bank. Further deals will be
considered overtime," Paul Garvey, manager financial market at
ME Bank said.

Australian banks have been keen users of a government bond
guarantee put in place late last year to help them weather the
global financial crisis.

They have raised more than A$112 billion of government
guaranteed bonds offshore and onshore since its inception,
Deutsche Bank data shows.

However, few triple B rated banks, such as ME, have used
the guarantee because of the sizeable fee of 150 bps attached
to it.

Deal details are as follows, according to arranger
Macquarie:

Issuer: ME Bank

Facility: Domestic fixed and floating rate notes

Guarantor: Australia

Amount issued: A$500 million

Maturity: Aug. 20, 2012

Set date: Aug. 20

Lead(s): Macquarie, NAB, Westpac

Issuer ratings: BBB (S&P)

Issue ratings: AAA (S&P)

Tranche: fixed FRN

Amount: A$250 mln A$250 mln

Coupon: 5.75% +50bp/BBSW

Yield: 5.815% +50bp/BBSW

Spread: +50bp/swap +50bp/BBSW

Issue price 99.823 100
($1=1.199 Australian Dollar)
(Reporting by Cecile Lefort)